Volkswagen chairman Bernd Pischetsrieder, who expects the company’s operating profit for the first quarter of 2004 to be “lousy”, says the VW group plans to slash 5 000 jobs over the next two years to help reduce costs by R16,2 billion.

Volkswagen chairman Bernd Pischetsrieder, who expects the company’s operating profit for the first quarter of 2004 to be “lousy”, says the VW group plans to slash 5 000 jobs over the next two years to help reduce costs by R16,2 billion.


According to a spokesman for the company, Volkswagen plans to cut the number of automotive-division workers by offering early retirement in Germany and replacing only 20 per cent of the people who leave the group.


Speaking at the Volkswagen group's annual conference in Wolfsburg this week, Pischetsrieder said earnings were affected by the effects of the strong euro and outlined some corrective measures to aid it in becoming a "powerful multi-brand group", including a 3,5 per cent reduction in its work force.

Profit after tax was R8,91 billion (R21 billion in 2002) and sales revenue reached R706,32 billion (R703,9 billion).

Despite tough competitive conditions in 2003, vehicle deliveries again exceeded the five million mark, and the group slightly increased its world market share. But the chairman said there were no signs of economic recovery yet, and the whole vehicle industry was exposed to high dollar/euro exchange rates.


quoted the German as saying that “Volkswagen had to be prepared for a worst-case scenario. The group’s key model, the Golf, did not meet expectations, leading to sales incentives for the car.


“It is clear that the operating profit for the first quarter of 2004 will be lousy, even compared with last year,” Pischetsrieder said. “January 2004 was the weakest month in many years”.

The VW group was responding to these developments with the ForMotion programme, intended to increase sales revenue, raise earnings and cut costs. Using this method, the group aims to achieve additional savings of R24 billion by the end of 2005.

"We have already been working on key elements of the programme for two years but now we are noticeably stepping up the pace and adding measures," Pischetsrieder said.

Pischetsrieder told the press conference that a board member would act as promoter for each of seven themes, assisted by a team responsible for implementing it. The themes are: product costs; one-off expenditure; overheads/process optimisation; sales performance enhancement; financial services earnings; commercial vehicles turnaround and increasing earnings at foreign subsidiaries.

Every aspect of the group's operations would be reviewed as part of the programme. The main targets included product costs, sales performance, overhead reduction and a commercial vehicle revival. Product cost measures are expected to make the highest percentage contribution to improved earnings.

There would also be a noticeable increase in the volume of identical parts fitted in different model ranges, aimed at reducing unit costs without compromising high quality standards.

Another group-wide goal is to reduce overheads, resulting in a workforce reduction of 3,5 per cent, although Pischestrieder insisted that this would not affect further recruitment.

Original article from Car